The Perils Of Multiple-of-Medicare Pricing

The Perils of Multiple-of-Medicare Pricing

Executive Summary

Multiple-of-Medicare (“MoM”) repricing is a popular and common cost containment strategy used by many plans and repricing companies. Renalogic has intentionally chosen to stay away from MoM methods because of the high risk of litigation. That risk has seemingly grown larger with a number of recent lawsuits involving the pricing strategy in various environments.

Cost containment strategies for any covered services must pass review of ERISA, the ADA, HIPAA and the ACA. Dialysis cost containment must clear not only those hurdles but also the added burden of the Medicare Secondary Payor Act (“MSP”), a particularly active field of litigation just now.

Several cases we’ve researched provide examples of the risk of MoM pricing and the potential added cost of defending the plan against litigation when using such strategies. Legal fees and costs of preparing for litigation alone can exceed $300,000. This is in addition to any potential trial or settlement costs, and the amount of any judgment or settlement. Renalogic uses a proprietary repricing model that DOES NOT rely on MoM, which combined with our uniquely intensive client support creates the most defensible administrative record to protect the plan against such risks. As Benjamin Franklin said, “the bitterness of low quality remains long after the price is forgotten.”

MoM and Plan Appeals.

The first Renalogic encounter with MoM was more than 10 years ago, when we helped a plan after a court rejected its attempt to apply 150 percent MoM, in Renal Treatment Centers v. Franklin Chevrolet. We were able to demonstrate that the payments were appropriate through research and an earlier version of our repricing methodology, not MoM. During the process, it became clear the court disliked the MoM method of determining dialysis claims. That case confirmed our decision to stay away from MoM repricing.

Over the years, we’ve sometimes seen MoM raised in appeals and litigation demands against our clients. Renalogic has also become aware of appeals, litigation and settlements involving non-client plans.

In some cases, challenges to MoM have caused plans to reverse MoM-based claims decisions and drop MoM methods, as a major Pacific Northwest retailer did. Detailed information about such cases is hard to find as the cases almost always settle confidentially before litigation.

MSP Cases and Appeals

While almost all cases remain confidential as part of a settlement agreement, a few do reach a decision and become part of the public record. One such case is Lubbock County Public Hospital District v. Specialty Care Management. Lubbock County was actually a suit for indemnification by a plan against its dialysis repricer, Specialty Care Management (“SCM”). As usual, the plan and provider settled before litigation, so this is a rare situation where information came out in secondary litigation. SCM had repriced Fresenius claims at 125 percent MoM. Fresenius sent a demand letter alleging this violated the MSP. The plan settled, paying more than a million dollars on the claims. Legal costs to the plan (without litigation) were more than $66,000.

Challenges to MoM under the MSP have also appeared in the public domain and resulted in plans moving away from MoM re-pricing:

 

  • A September 18, 2015 letter from Fresenius to the Oregon Insurance Commissioner demanding action against Regence and Providence for using 125 percent MoM for dialysis claims in their employer plans in Oregon.
  • A July 19, 2016 letter from Dialysis Patient Citizens (“DPC”) to the Centers for Medicare and Medicaid Services (“CMS”) demanding action against Providence, Regence and Premera for using 125 percent MoM in their employer plans in Washington. (DPC is a dialysis advocacy organization principally funded by the dialysis provider sector.)
  • Four cases filed by DaVita in 2018 – 2019: DaVita v. WinCo, DaVita v. Amy’s Kitchen, DaVita v. Marietta Memorial Hospital, and DaVita v. Virginia Mason Memorial Hospital. Amy’s Kitchen, Virginia Mason and Marietta Memorial were all dismissed before trial and are being appealed in which the MSP is central. The WinCo case is still in the trial court.
    • WinCo was advised by EthiCare. DaVita is currently suing EthiCare separately to find out how it determined the claims, alleging it used 125 percent MoM.
    • Virginia Mason was advised by Advantria and applied 125 percent MoM. This issue has been raised by both DaVita and by DPC in an amicus (“friend of the court”) brief by DPC.
    • Marietta Hospital was advised by MedBen and applied 125 percent MoM. This issue has been raised by DaVita and by DPC in an amicus brief.
    • Amy’s Kitchen was advised by Renalogic and applied Renalogic’s Usual and Reasonable methodology, which is based on market analysis and not Medicare rates. DaVita and DPC (in an amicus brief) nonetheless insinuated that the claims determinations were “tied to Medicare rates.” Evidently, they believe the issue has so much merit that it’s worth raising even when it’s irrelevant.

MoM Challenges Outside the Dialysis Market

MoM has become a litigation target in other health care markets too. For example, in a recent case, Salinas Valley Memorial Healthcare v. Monterey Peninsula Horticulture a provider launched a major challenge to a plan’s adoption of 140 percent MoM. The plan ended up settling with the provider, dropping MoM, and suing the advisors who had counseled it to adopt MoM. A similar set of issues led to intensive litigation by a plan against its advisors counseled it to adopt reference-based pricing in Central Valley Ag Cooperative v. Anasazi Medical Payment Solutions, which is still ongoing.

Other non-dialysis health care cases of interest include:

  • Weber v. Horizon Healthcare Services, a class action filed last year alleging improper use of MoM rates in violation of ERISA.
  • Advanced Gynecology and Laparoscopy et al. v. Cigna, in which 18 providers are suing Cigna for using “repricing companies” to determine claims at lowball rates (probably including MoM), to force providers to either litigate or accept slightly higher negotiated payments. The providers claim this is “racketeering,” in a case which likely won’t be resolved for years.
  • Culver City Surgical v. Pacific Coast Feather, in which 175 percent MoM was applied in a claimed violation of ERISA and settled quickly without any defense under undisclosed terms.
  • Tate v. Pacific Steel, in which 150 percent MoM was applied in a claimed violation of ERISA, and also settled quickly under undisclosed terms.

Conclusion

The evidence strongly supports the early decision by Renalogic to commit to the company’s proven and tested proprietary methodology for repricing dialysis claims. Past and ongoing litigation involving various deployments of MoM both in and out of the dialysis marketplace confirm what Renalogic has long believed, that MoM repricing for dialysis claims is never in the best interest of a plan or an employer group because it increases risk, and potentially much more costly. Instead, the Renalogic methodology, which has withstood appeal after appeal, provides a stronger foundation for all clients, and helps create the most defensible administrative record to protect plan assets.

During these unprecedented times within the healthcare space, it’s never been more important to minimize costs, while also improving the health of plan members. Find out how we can help you save precious health plan dollars with our proven dialysis cost containment and Kidney Dialysis Avoidance Programs:

Renalogic

Renalogic, headquartered in Phoenix, AZ, was founded in 2002 as a specialty dialysis cost-containment company to help clients understand the unique market dynamics in the dialysis provider community. The company has evolved to become a comprehensive provider of data-driven, end-to-end chronic kidney disease (CKD) care and cost management programs for the self-insured industry. Renalogic’s professional team includes leaders in healthcare administration, care management, legal specialists in ERISA and healthcare law, contract negotiation, payer/provider negotiation, and clinical experts.